Using Bill Williams’ MFI and Volume States for Trading Signals

Summary

The document introduces Bill Williams’ Market Facilitation Index (BW MFI), calculated as the high-low range divided by volume, and interprets its movement alongside changes in volume. Rising or falling values for both are treated as distinct market states, while divergence between the two is associated with unsupported movement or balance between buyers and sellers. It describes four states—green, fade, fake, and squat—based on whether the current MFI and volume are above or below their previous values.

Three educational system designs follow: display the market state, map each state to a general signal such as seeking an entry or exit, and combine the green state with a moving average to produce a buy or sell indication based on the close relative to that average. The article provides rules and implementation blueprints, but no performance results or evidence that the signals are profitable. It recommends additional filters and testing; the indicator and simple rules may need adjustment for a given market or trading style.

Key ideas

• BW MFI relates the high-low price range to volume to describe market facilitation.
• The indicator’s four states compare current MFI and volume with their previous readings.
• The green, fade, fake, and squat states are interpreted as activity, weakening participation, unsupported movement, and balance, respectively.
• A moving-average filter assigns buy or sell direction when the green state occurs, based on the close relative to the average.
• The strategies are educational designs and have no stated performance validation.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.